I do understand that this is a quite pointless operation, since I do not see a way to define "speculation" in a precise way and the FX market is a strange beast (lot's of swaps, big OTC market).

Still I have heard different stories from several sources in the industry and academia, stating exactly orthogonal positions on that topic:vast majority is speculation or speculation is dwarfed by true exposure to FX....

I don't see how BIS data could help here, do you guys see a good way to get a first order approximation on that question?

One approximation is look at the volume of fx options on SDR(DTCC data) and look at the high delta vs low delta trades. Typically low-delta options are used by corporates for hedging (they just want to take the tail out of the picture) and they don't have premium to spend. The high delta is mostly speculators/hedge funds/banks.

The problem's even thornier then you think. A lot of "speculative" order flow, particularly the dumb retail variety, is internalized well before it ever reaches anything resembling a real market. I really doubt Plus500's CFDs are showing up on any BIS survey.

My gut sense is that most of the volume is gambling, but the bulk of the positions at any given time are "real money". You have a lot of day traders who have small position limits, but ridiculously high turnover. However I'd guess that most of the major movements are being driven by central banks and other whales. They don't contribute that much volume but do take such huge positions that they soak up a ton of liquidity.

> A lot of "speculative" order flow, particularly the dumb retail variety, is internalized well before it ever reaches anything resembling a real market.

Speculative retail flow is mostly not even hedged. 99% of retail traders lose all their money in short order. Just leave them alone and, in a few months, your profit margin on their deposit is 100%. If it's taking too long, just give them massive leverage.